Mike Smith’s wife loves Melbourne and, as he says, that’s half the battle. Five years after they shifted to Australia so he could take over running Australia and New Zealand Banking Group, he has no intention of upsetting domestic harmony.

The ebullient Smith is an Englishman abroad but he is contemplating Australian citizenship. “I’m sure I will [apply],” Smith tells the Weekend Financial Review on the eve of his five-year anniversary on October 1.

“I want to stay in Australia. I like Australia and the people – it’s a great place to live. I love Melbourne. My wife is very happy.”

Smith, 56, is adamant he has a lot more to do with his plan to make ANZ a super-regional bank in Asia, although he argues that is not necessarily the biggest change he has instituted at the bank. Talk of him considering a move back to England is risible.

Asked if he was approached by the scandal-riven Barclays to return to his native country to run the bank, Smith confirms he was.

“I was sounded out by a couple of people, yeah,” he says, “[but] why would I want to go into that political hot water? They couldn’t pay you enough to do that.

“And even if they did, they’d never bloody deliver on it,” he says in reference to the troubles afflicting the UK banking system.

That Smith looks likely to be at the helm of ANZ for the foreseeable future is welcomed not just by investors who like ANZ’s point of difference and Smith’s deep experience but by those who believe Australia is desperately short of genuine Asian intelligence.

Prominent director Rod Eddington, chairman of JP Morgan Australia and former boss of Cathay Pacific, knows Smith from long stints in Hong Kong when the ANZ chief was a senior executive at HSBC, refreshing the contact when Eddington was drafted to chair ANZ following the departure of Charles Goode (Eddington stepped aside from the role as he was embroiled in the collapse of the Allco group).

“There are two things about Mike,” Eddington says. “He is an immensely experienced banker, with that superb training from HSBC, and he is deeply, deeply, knowledgeable about Asia. And not just Asia; South America too.

“That is absolutely critical, as so many Australian companies have lost money in Asia and, while it may be a place of great opportunity, there are many poisoned chalices. Mike knows the difference between Singapore and Malaysia, between Japan and Korea, between Vietnam and Thailand, so I think we are immensely fortunate he is staying in Melbourne. Not just the bank, the whole business community.”

Smith’s attitude towards returning to his home country (which, to be fair, he has spent relatively little time in as he went to school in Kenya and globetrotted in his three decades at HSBC) reflects how he views the broader international banking scene and global economy.

“Where does Australia’s future sit? It sits with this relationship in Asia,” he says emphatically.

“It’s going to be China, India, Korea, Japan, Indonesia and Vietnam in time.”

ANZ has set the goal of earning 20 per cent of group profits outside of Australia and New Zealand by the end of 2012 and between 25 and 30 per cent by 2017.

ANZ had already tried and failed to become an Asian bank built around the acquisition of Grindlays Bank in 1984, concentrated in south Asia and the Middle East. But Smith’s predecessor, John McFarlane, sold Grindlays a decade ago to “de-risk” ANZ and that is something Smith laments to this day as a “massive strategic mistake; a sign of management being manipulated by the market”.

When he declared ANZ’s plan to return to Asia in 2007, he vividly recalls the doubters. “Everyone talked about that Asian piece and thought I was nuts to start with.”

But as significant as the shift back to Asia is, Smith feels another transformation under his stewardship has been even more fundamental: the decision to formally break the connection with the Reserve Bank of Australia’s interest rate changes by setting ANZ’s rates on its own timetable.

“We were a bank with a very weak balance sheet and we have now one of the strongest balance sheets in the world. Australia had 20 years of good times where credit standards had actually declined and it was not a good quality book. I think it was a high-risk book, frankly.”

Shortly after Smith arrived, ANZ was at the forefront of local banks that had lost money on failed companies when the global financial crisis hit our shores in 2008. Its exposures included Centro Properties, ABC Learning Centres, Opes Prime, Babcock & Brown, Tricom, Timbercorp and Great Southern. This week it sent in the receivers to collapsed timber company Gunns.

Smith says that at the time the standout balance sheet was owned by Westpac Banking Corp but the decision by Westpac and Commonwealth Bank to pursue first home buyers in 2009 has eroded that position.

While its an easy out for chief executives to lay blame at problems inherited from their predecessors, Smith feels the risks facing ANZ when he arrived were not appreciated by the market.

“The market didn’t get if for years, which did allow me to move without there being a massive fanfare,” Smith says.

ANZ is now carrying 60 per cent more capital than it was in 2007, partly due to regulatory rules; it has far less short-term wholesale funding that can create rollover risk when capital markets seize up; and, like other banks, it has increased its deposit base.

Along with the other big four banks, ANZ is one of only 16 banks in the world rated AA- or better.

“The thing that we did really carefully and well, is strengthen the balance sheet. When I look back we are so well positioned now,” Smith says.

That said, when the histories of Smith’s time at ANZ are written it is the Asia story which will dominate.

Chris Hall, senior investment officer with Argo Investments, says Smith “has done a terrific job in setting and adhering to a differentiated strategy, which is starting to pay off”.

Smith says: “We started as a domestic bank with a number of international outposts. I would say we have now created a truly international bank.”

His achievements include obtaining banking licences in Vietnam, Singapore and the Philippines, restarting operations in India, incorporating in China and opening branches there, and becoming the first Australian bank to receive a retail RMB licence in China this year.

There was also the $687 million acquisition of selected assets in seven Asian countries from Royal Bank of Scotland in 2010.

Most close observers would agree the bank’s Asian footprint is heading in the right direction, but some quibble with the notion that ANZ is truly an international, particularly as it is still a relatively small player in Asia compared to Standard Chartered, Citigroup and Smith’s old home, HSBC.

This includes RBS retail, wealth and commercial businesses in Taiwan, Singapore, Indonesia and Hong Kong, and institutional businesses in Taiwan, the Philippines and Vietnam.

“While ANZ’s much-hyped ‘super-regional’ bank strategy is a point of positive differentiation, it’s not the near-term differentiator that it’s often made out to be,” CLSA banks analyst Brian Johnson says.

Johnson points out that “pure Asia” contributed about 9 per cent of group profits in the first half of 2012, compared to 17 per cent in New Zealand and the vast majority in Australia.

ANZ originally planned to have Asia contributing 20 per cent of group profits from Asia by the end of this year. It has since shifted the goalposts to reach that target for the whole Asia, Paciﬁc, Europe and America (APEA) division.

That takes ANZ to about 16 per cent of its earnings coming from APEA, compared with 8 per cent in 2007. Adding in a further 4 per cent of profits booked in Australia earned directly from business derived from international clients and Smith says they’re virtually bang on the 20 per cent target.

“We’re effectively there and we’ve had to deal with the crisis. So I’m pretty pleased with that,” Smith says.

Hall makes another point with which investors, Eddington and even rival banks agree: Smith’s reputation has enhanced ANZ’s ability to attract very high-quality management with international experience.

“He’s employed very, very good people,” Hall says.

That bench strength includes the highly-regarded former Westpac chief financial officer, now ANZ head of Australian banking Phil Chronican; CFO Shayne Elliott, with pan-Asian experience from Citigroup; head of institutional and international Alex Thursby (who joined ANZ two months before Smith but elevated during his reign); and head of strategy Joyce Phillips from Citigroup, also well regarded in the market.

Eddington and Hall add that executive strength meshes with Smith’s own deep experience of banking, economies - and crises.

“He really has his finger on the pulse on what’s going on around the world. I think that all stems from his connections from his HSBC days,” says Hall.

“He has called the crisis very, very well. He warned very early on of the rumblings of the GFC and how long it was going to take.”

As for the bank’s future, Smith acknowledges the 25 to 30 per cent target for APEA in 2017 (which he may not be around to see through) will be a challenge.

“That target’s possible and it’s on an organic basis because there is still the opportunity to do an acquisition or two,” he says.

“I’d like to do more in Hong Kong and greater China. We need to be much larger in India.”

But closer to home in Melbourne, Smith acknowledges there is work to do, although he strongly denies suggestions the Asian focus has left Australia an “orphan”.

Deutsche Bank analyst James Freeman, who has a “buy” on ANZ, says the performance of the local retail arm is the disappointment, largely because annual cost growth of 5.8 per cent has been higher than the 3.2 per cent average of peers.

“We believe that more needs to be done on the cost front for ANZ’s retail business to bridge its performance gap versus peers,” Freeman says.

Smith acknowledges the Australian retail bank, which comprises a third of the group, “had a problem on its cost side and there was a lot of pressure from the deposit side. I think we took our eye off the ball a little bit,” he says.

“[But] I would absolutely dispute the fact that the Australian business is an orphan. We are growing the Australian business strongly. We are the strongest institutional bank in Australia. We are growing market share in the commercial bank, both in terms of deposits and assets. And our retail banking share is going up. It’s still our key business.”

Still, it is Asia Smith will be remembered for. “By the time I leave I want that strategy really cast in stone,” he says.

He says the pendulum has moved to ANZ being a “truly” international bank but feels he has more to do.

And he echoes the view of Eddington and others that this strategy is not just right for ANZ.

“I actually think this is the right thing to do, not only for ANZ but for Australia,” Smith says. “I believe an economy the size of Australia and with an economy, trade and investment pattern reliant on the region, it is crazy not to have a bank that is supporting that.”